EUR

Yesterday’s trading saw very light volumes, and with today being Veterans Day and the House shutdown vote scheduled for tomorrow, it’s hard to feel overly enthusiastic about the day ahead. On a brighter note, the imminent reopening may lead to some data releases starting next week. While September data should be accurate, October’s figures could be less reliable due to backfilling—still, some data is better than none.

The dollar showed a sharp divergence yesterday, performing differently across G10 and EM currencies. It feels a bit overextended, but it’s unclear which side will adjust to converge. The UK labor report disrupted tactical EUR/GBP shorts, as the data was soft across the board, contrasting sharply with our Nowcaster. For now, stepping aside seems prudent. With the pound’s small bounce, there might be an opportunity to short on some crosses again. I remain slightly long on the kiwi at current levels, with minimal deltas left in EUR/SEK, but otherwise, my positioning is quite light.

The euro failed to break last week’s highs despite reopening optimism elsewhere. Given last week’s strong selling during the currency’s bounce, it’s another reason to stay cautious for now and wait for US data when it’s released. That said, there could be medium-term value in resetting longs closer to the 200-day moving average, which will soon align with the August lows around 1.14. Until then, patience is key.

GBP

Rachel Reeves made headlines yesterday in a Radio 5 interview, signaling the clearest indication yet of breaking the manifesto and confirming the likely removal of the two-child benefit cap. Sterling had been trading relatively well, aligning with our view that the worst had been priced in, but this morning’s weak LFS data changed the tone. The PMI employment component may have been misleading, and unless the REC report at the end of the week shows improvement, it’s hard to avoid concluding that official employment figures are catching up to weak survey data.

The BoE December pricing shifted slightly, moving around 4 to ~20bp. While it’s hard to sell pounds outright given the current setup, it feels like the BoE is now the key driver for this trade. If upcoming data, particularly next week’s CPI, supports a rate cut, another leg down for GBP could be on the horizon. Tomorrow’s Q3 GDP and IP data could also produce notable outcomes, especially with the JLR shutdown in play. The bias leans toward returning to selling GBP. For EUR/GBP, 0.8750/65 remains solid support for dip buying, while 0.8865/75 is the top resistance. In cable, 1.3250/70 is key resistance, with 1.3000/20 as critical support.

JPY

JPY remains under pressure across the crosses despite our franchise observing stronger offshore RM demand for the currency in recent sessions. It seems only a matter of time before the 154.35/50 resistance zone breaks, potentially leading to a swift test of 155 and triggering another round of likely verbal intervention from the Ministry of Finance (MoF). The 157-160 range appears to be the critical danger zone, but given the rapid pace of the move, it seems likely that a squeeze through the upper end of this range will be needed to sustain momentum—especially if the MoF's response remains limited to rhetoric.

It’s challenging to align with the MoF’s intervention efforts at this stage, given the imminent release of key data that could shape December Fed expectations. Notably, the new weekly ADP pulse is expected at 13:15 GMT today, which may provide further clarity. For now, staying on the sidelines seems prudent.